University degrees on the rise – but so are costs, career uncertainty

Grads tend to cluster in fields of study with uncertain returns on investment
By Liz Bernier
|Canadian HR Reporter|Last Updated: 05/06/2014

As one of the most highly educated countries in the world, Canada has seen its proportion of university graduates rise significantly over the past two decades. But while university degree attainment has risen steadily, so have the costs — and uncertainty about career prospects.

Between 1991 and 2011, the proportion of young workers with a university degree has increased significantly, said Sébastien LaRochelle-Côté, an Ottawa-based economist and editor-in-chief of Insights on Canadian Society.

“There has been a large increase in the proportion of workers aged 25 to 34 with a university degree, so from 19 to 40 per cent among women, and from 17 to 27 (per cent) among men,” said LaRochelle-Côté, who co-authored a Statistics Canada study on the subject.

But as enrolment rates continue to rise, the cost of a degree is increasing as well. Canada ranks first among the 34 Organisation for Economic Co-operation and Development (OECD) countries in terms of higher education, but our cost of education is roughly double the OECD average, said Benjamin Tal, deputy chief economist at CIBC World Markets in Toronto.

“Despite the fact that the cost is rising, enrolment is rising. Usually, when the cost goes up, people buy less. But that’s not the case with education,” he said.

“I guess people are realizing that education is the key for everything, so it’s definitely a necessary condition… you do need education in order to succeed in this society.”

Distribution in labour market

Given the steady increases in the proportion of university graduates, how are they distributed in the labour market?

“That’s essentially the question and that’s why we did the studies,” said LaRochelle-Côté. “What happened in terms of the occupational profile — we have more (graduates) so are they distributed differently than they were 20 years ago?”

The answer? There has been some degree of change but not much in terms of the top occupations that graduates hold — and even less so among women, he said.

“The top three occupations among women university graduates are the same as in 1991 — nurses, elementary school teachers and secondary school teachers. And these three occupations accounted for 20 per cent of all women university graduates both in 1991 and 2011, so it’s pretty static.”

Among male graduates, the top occupations were relatively similar in 1991 and 2001 — financial auditors, accountants and secondary school teachers featured high on the list in both years — but the concentration of males in specific professions was not nearly as strong as it was for women.

“Concentration has always been stronger among women graduates compared to men,” said LaRochelle-Côté. “That’s not to say that there hasn’t been any change — we looked at the top 25 (occupations) and some of them have been disappearing from the list… but levels of concentration haven’t changed.”

The proportion of women grew in several different occupations, including health policy researchers and consultants, human resources specialists and general practitioners and family physicians.

Too many overqualified grads?

Because there are so many more university graduates, some might imagine there’s been a corresponding increase in how many overqualified workers are out in the labour market, said LaRochelle-Côté. But, actually, the overqualification rate, as the study measured it, hasn’t really changed.

“In terms of overqualification, there hasn’t been a lot of movement. You’ve got a large supply and there’s no information on labour demand in this study. But given the fact that you’ve got a large supply over the period, and that overqualification rate didn’t change, then one explanation is the fact that there’s probably been an increase in the demand for university graduates as well. That’s the logical implication of the results,” he said.

LaRochelle-Côté and his fellow researchers defined overqualification as the proportion of university graduates in occupations demanding a high school education or less.

“So that’s one measure of overqualification — it’s not the only one that exists, and I want to emphasize that. It’s the only one that we could use to try to get a sense of what happened over the course of the 20-year period that started in 1991 and ended in 2011,” he said.

“Among men, it’s been very flat — 18 per cent in 1991, 18 per cent in 2011. Among women, it’s been a very small decrease — it was about 20 per cent in 1991 and now is 18 per cent… so not only is there not a lot of change over time, there is not a lot of change between men and women.”

Overqualification can be a difficult concept to measure or pin down, said Jeffrey Reitz, professor of sociology at the Munk School of Global Affairs at the University of Toronto.

“The study sets its own standard for each occupation in terms of what the occupational requirements are — so they may or may not be the standard employers are using. I think employers in many jobs, even if they’re not professional jobs, if they get applicants who have higher levels of education, they’re going to prefer those applicants. So from the point of view of the employer, these people may not be overeducated — they’re simply the best-educated,” he said.

“It doesn’t mean that people are overeducated, in two ways. One is that employers actually pay them (more). Secondly, the reason why people seek an education is not only to get a better job… but I think also people get an education because they feel it puts them in a position to enjoy more of what life has to offer.”

Immigration, field of study major factors

One important distinction the study found is certain groups and populations are more likely to be overqualified.

Immigrants who have university degrees from outside Canada or the United States are much more likely to be overqualified, said LaRochelle-Côté. However, immigrants with degrees from Canada or the United States have an overqualification rate very close to that of Canadian-born degree recipients.

“One of the findings of this study is that immigrants are among the most overeducated. And what that really means is actually it’s the same phenomenon that in other forms is called skill under-utilization,” said Reitz. “Immigrants have skills that are not being used in our labour market, and, as a result of that, university-educated immigrants tend to be working in occupations at a lower level of qualification.”

Another significant factor is variation by field of study — so those in fields such as the arts and humanities are more likely to be overqualified, found the study.

That was also the conclusion Tal discovered in a CIBC study, Degrees of Success: The Payoff to Higher Education in Canada.

“People think, ‘OK, I’ll go to school and everything will be fine, but it is a very expensive investment and sometimes, in many cases, we see a situation in which the return — namely, what kind of income people generate after they complete their education — is relatively small,” he said. “And this has a lot to do with what field of study, namely, to the extent that you spend four or five years studying something that is not needed by the market. Then the return on investment will be very limited.”

Most graduates knew from the beginning that their field of study has a major impact on how much they can expect to earn — but they are still choosing the same fields, said Tal.

“We all know that if you have an engineering degree, you will do much better than if you have an art history degree. That’s not a secret. We all know what will generate income and where the demand is. Despite the fact that we are equipped with this information, we haven’t seen a significant change in the distribution in the fields of study,” he said.

“Canada is leading the OECD in terms of number of people who study, but also in terms of number of people with education that live in relative poverty. And I think that’s the key — those people are unable to translate those degrees into jobs and I think that’s very important to change. To me, this is a very telling statistic that the system is not working.”


LABOUR MARKET

Degrees no guarantee of good job

Millennials — and their boomer parents — experience a high level of anxiety about their career prospects, according to a survey by the Broadbent Institute of 2,047 Canadians.

•52 per cent of millennials think their generation will work on contract, mixed with permanent jobs or contracts alone.

•92 per cent of boomers know at least one person with a workplace pension, while 20 per cent of millennials don’t know anyone with a pension.

•60 per cent of millennials think the gap between rich and poor will grow during their lifetime.

•Only 14 per cent of boomers had a worklife similar to the one their children expect to have.

•49 per cent of baby boomers think their children’s economic opportunities are worse today than when they were growing up.

Source: The Broadbent Institute

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